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Are Utilities Finally Falling in Love With Solar?

Two different partnership models between solar companies and utilities may show ways the industries can work together.

For the five years I've been covering the solar industry for The Motley Fool, I've heard solar industry executives talk about how utilities need to stop fighting the solar industry and embrace this revolutionary technology. Usually this is in reference to fights over net metering or efforts to make residential solar more costly.

But while many solar companies have been fighting to expand their preferred business model -- namely the residential solar lease -- utilities have been trying to make solar energy a benefit and not a threat to their business. After all, if they fight solar energy too hard customers could defect from the grid altogether, which would be terrible for almost everyone in energy.

Here's how the dynamic between solar industry and utility industry could go from being mortal enemies to forming a more symbiotic relationship.

SunPower's residential installations like this one may soon belong to ConEdison. Source: SunPower.

Utilities find ways to love solar As utilities have attempted to find ways to make money on solar energy, they've tried different business models. Fighting solar outright didn't work, especially in California and Hawaii, so they had to find ways of owning the asset without angering customers.

Community solar is the first big experiment for utilities, highlighted by Xcel Energy(NYSE:XEL) in Minnesota. That's where SolarCity(NASDAQ:SCTY) has said it will build up to 100 small 1 MW solar power plants that will sell energy to Xcel Energy customers for below the normal utility rate.

According to the Solar Energy Industries Association, 24 other states have at least one community solar project online and more will be testing the concept. SolarCity has been aggressive in getting into this business, and SunPower(NASDAQ:SPWR) says it will do community solar projects in the future as well. (NASDAQ:SPWR)

The next model could come from a surprising partnership between ConEdison Solutions and SunPower to provide solar leases in New York. ConEdison Solutions is the unregulated arm of Consolidated Edison and will use its sales channels in New York and its low-cost financing to develop projects.

In both community solar and ConEdison's leasing program the utility will own the solar systems but the solar companies will generate immediate sales and margin on what they build. It's a win-win for both industries and could lead to lower costs for customers because utilities have lower cost capital.

We don't know what other novel structures the solar and utility industries will come up with in the future, but it's clear that they're seeing the need to work together instead of simply fighting.

The fight over net metering rages on As these partnerships form, there's still a lot of debate about what happens with net metering, the structure that makes most residential and commercial solar systems viable. Utilities around the country are trying to add fees and minimum charges that will make net metering less viable and solar companies continue to resist.

But it's progress that the two industries are trying to find ways to work together. Solar energy is now winning against utilities on cost, but it also needs customers to stay on the grid for the time being. So, partnerships like lease programs and community solar will be good advancements. It'll take time to figure out if this is becoming a symbiotic relationship or a temporary cease-fire in a battle that will rage for decades to come.